Under the Fair Labor Standards Act (FLSA), business owners and managers may not share in their servers’ tips. In recent weeks, the U.S. Department of Labor’s Wage and Hour Division announced recoveries against two restaurants accused of misappropriating tips provided to employees. The first case involves a Tennessee sub shop where the owner kept a portion of credit card tips received from customers. The owner told the DOL that he believed he was entitled to a portion of those tips because he provided service to customers in addition to his other work at the restaurant.

The second investigation accused a Kentucky bakery and coffee shop of pooling servers’ tips and then allowing managers to participate in the pool. In both cases, the employers were assessed back wages as well as liquidated damages.

Managers, cooks, and other non-tipped employees at restaurants may not share in employees’ gratuities. While the FLSA and most states allow some form of tip pooling, those pools are limited to servers, bartenders, and host employees who actually interact with diners. Employers that attempt to supplement other employees’ wages from these pools open themselves to DOL investigations and fines, as well as potential collective action lawsuits from employees deprived of their full tips.

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